If you are in the market for a new aircraft or have been thinking about purchasing your first private jet, there are quite a few intricacies that stand in your way. For those who have prior experience, some of the aspects might have changed over the years. And for the first-timers, well, the whole ordeal might prove as a difficult challenge.
Having said that, one should not think of aircraft financing as something too intimidating. If you are thorough and take all the necessary precautions, you should be okay.
The first thing you want to figure out is what type of lender you want to select. Of course, if you have the capital yourself and are not looking to take a loan, you can skip this step. However, for those jet enthusiasts who do not have as much net worth, this is important.
There are two distinguishable lender types when you are looking to finance an aircraft. Aviation-focused lenders are the first, and traditional lenders are the second.
The former specializes in loans related to aviation, including the aircraft itself. Meanwhile, traditional lenders offer a plethora of different loans, ranging from cars and houses to private airplanes.
Now, generally speaking, the differences between the two lender types are not that noticeable as far as obligations go. Usually, the finance term is at 4 percent and lasts for 20 years on average. Moreover, lenders ask you to use the aircraft as collateral.
You can negotiate the details but expect to pay monthly installments with interest. So long as you fulfill your obligations, you should not worry about encountering issues.
When you are in the market for an aircraft, you might be surprised by all the available options. Thanks to different aircraft models, you can pick according to your budget. In other words, there is no need to spend a few million dollars and take such a massive loan when there are aircraft that cost less than one million dollars.
For example, a light-sport aircraft can cost as little as 15 thousand dollars, whereas single-engine airplanes have a price range of 20 to 50 thousand.
It is when you go to multi-engines and jets that the costs start to rise. Ultimately, the decision comes down to your personal assets or how much you are willing to commit in terms of taking a loan.
It is worth noting that the lack of experience should not limit you to get a better deal for yourself. You can seek help from aviation experts at https://aerospaceunion.com, which will help you with various intricacies regarding legal and financial matters. They can also advise on picking the right aircraft option in case you are struggling to decide for yourself.
Alternative Payment Options
If an aviation loan or cash at your disposal is not available for aircraft financing options, do not fret. There are still a few payment methods that you can try.
A personal loan might not seem like a clear choice because it is still a commitment and a toll on your financial well-being. Moreover, you cannot expect to get that much from a personal loan. Getting more than 70 thousand dollars would be a far-fetched idea. Lastly, taking a personal loan also means needing a solid credit score.
Nevertheless, if paying a personal loan makes more sense since they are easier to manage and you do not have to put up collateral, then go for it.
Leasing an aircraft is not as common, but they are beneficial if you are looking for a larger jet. While the aircraft owner retains the title of the property, you can still utilize the aircraft. It is also important to note that when you are thinking about a lease, figure out whether you want a “wet” or a “dry” lease. The former comes with an aircraft crew, maintenance, and other benefits, whereas a “dry” lease offers less flexibility.
A joint partnership deal is also worth considering if you aim to decrease financial obligations. Having multiple people as owners of a private jet can work out so long as there are no clashes of who gets to use the aircraft if the desired destinations and schedules differ.
You can check local flight clubs and find out if they are accepting new members and how much they charge to join.
One last thing to note about aircraft ownership is additional costs. Keep in mind that in addition to your financial obligations to a lender, you will also need to consider aviation insurance, fuel and oil costs, repairs, maintenance, and storage.
Finally, depending on where you live, there might be certain directives that oblige you to pay pollution tax. Make sure to consider all the additional costs and recalculate your finances before you make the final decision.